Thursday, May 10, 2007

Using my blog to launch your Blog!

This is an offtopic rant - you have been warned. For the past few weeks I have been trying to delete comments posted by a lot of bloggers who have been simply trying to get a link spam going from my blog to theirs. Looks like they are hoping that Google will improve their page ranks. Honestly, I would not have minded doing something like that if they have been polite enough to ask me in the first place. Instead they pose as commenters and just say things like "nice blog" and post a big URL of their blog along with it.

Well my dear fellow blogger, I am glad you have learnt your google 101 lesson but you are stupid enough to not read between the lines. In any case, I am not in the mood to entertain you using my blog as your beta test area for Google lessons. I am going to delete your comments and treat you the way I treat spam.

Friday, April 06, 2007

The elegant investment advice

Some of the great advices on personal finance is as simple as it can be. Take the case of Dilbert on personal finance This is a very concise 120 odd words of advice on how to manage your personal finance and to be perfectly honest with you, I think it is really great advice! It lets you not worry about the little things like market fluctuations and general policy decisions that happen from time to time. Maybe we also need to start looking at simple (and not simplistic) ways of managing our own money.

Friday, March 16, 2007

Oops! I have a long term capital loss

I just figured out that one of the scrips I hold is in the red and I have crossed one year period of holding it. The scrip over the year had only reached a modest 10% gain which was quickly wiped out by the recent market downturn and add to that we just celebrated one year of ownership! So I was contemplating selling it off and to my dismay I found that I cannot write the loss off against any other gain.

The way I see it, short term losses can be written off against short term gains but long term losses cannot be set off against long term gains since they are not taxable anyway! So it seems I need to just sell it and swallow my loss (and pride :-) )

Thursday, March 08, 2007

Advance tax date is approaching

Well folks the individual advance tax due date is approaching soon. March 15th 2007 is the big day before you pay the last installment of advance tax. Please do so to avoid additional penalty later.

Update : You can pay advance tax online at NSDL website

Monday, February 26, 2007

Tracking NSE IPOs

The stock market in India is booming like nobody's business and so many companies are looking at going public by offering an initial public offering (IPO). The whole IPO scene has become an easy way to make money. Just subscribe to an IPO offerng during the offer period and then once the stock lists, dump the sucker in the market and make an easy 10-25% returns. The key to success is obviously picking the right IPO. So how do you do that? I use the classic herd behaviour approach to do it since I dont have the time to sit and analyze each company and its fundamental merits. Let me explain in detail...

The NSE website lists all the currently running IPOs and when you click on any one of them it actually gives you near realtime data on how much of subscription that the particular IPO has undergone during the offer period. If I see a large (1000 - 4000%) oversubscription especially in the institutional buyer's market, I figure that the big guys with their advanced research teams have figured out something interesting in this stock so I might as well buy it.

Mind you this works most of the time especially if you are planning to sell short term. There have been spectacular failures in this approach for me in the past but hey - this isnt exactly research you know! I am OK with the results that I have seen so far.

As far as getting an allocation goes, let us not even go there....!!!

I decided to start tracking the current NSE IPOs so I can plan this game better (of course it is a game - a gambling game - don't be dumb and think we have anything that is scientific here!). To make the IPO dates public, I initially added it to Google calendar. I am adding a link to the same on the right. If you use google calendars to track any of your dates, just clicking on the button will add my calendar to your list of available calendars.

Monday, February 19, 2007

What is your asset allocation

I am sure all of you have heard about asset allocation in standard textbooks and other investment books/periodicals but I am curious as to what your real asset allocation is ? i.e. how far is reality away from textbooks. So my loyal readers, if you can leave a comment to this post, indicating your percentage of investment in each of the following asset classes and whether you are happy with the returns. I will consolidate the results and publish what is reality based on what I see from you folks.

F&O Market investments
Stocks (Shares/IPO)
Bonds (RBI, ICICI, REC etc.,)
Fixed deposits (Banks , third parties)
Equity Mutual funds
Debt mutual funds
Post office (POMIS)
Real estate (Apartments, vacant land)

Please dont post the actual amounts just the % distribution.

Sunday, February 18, 2007

Must read for global Indians

RBI has a fascinating FAQ on foreign currency rules for resident indians. Do take a look at

Thursday, February 15, 2007

Mutual funds - Growth vs Dividend - What should we choose?

Some time back I had posted an entry where I had recommended that in mutual fund world, choosing the 'Growth' option is the way to go and the 'dividend' option whether you take the cash out or you reinvest it, is really a pain from a management perspective. I have been thinking about this choice further and I want to refine my recommendation a little bit more considering the current tax laws prevalent in India.

Indian tax laws for equity mutual funds (funds that invest > 65% of their corpus on common stock) specify that

  1. Short term ( less than one year) capital gains tax is 10%
  2. Long term capital gains is 0%
  3. Dividends paid are non-taxable
  4. Security transaction tax (STT) of 0.1% has to be paid on all SELL transactions

Indian tax laws for debt mutual funds specify

  1. Short term capital gains is treated as income (basically added to salary and taxed at the tax bracket you belong to)
  2. Long term capital gains is 10%
  3. Dividends paid are non-taxable in the hands of the investor but they undergo a tax called dividend distribution tax (DDT) (12.5% + surcharge + education cess) that the fund has to pay before declaring dividend. This effectively reduces the quantum of the dividend in your hands
  4. There is no STT.

So if you are in the highest tax bracket, it might make sense to opt for the dividend option when you are buying debt mutual funds since effectively you pay onl 13.xx% as tax on the dividend as DDT as compared to growth option.

For equity mutual funds, the verdict is very clear folks - growth is the direction in which you should be going.

Sunday, February 11, 2007

Gold Funds - an update

Deciding to dig deeper into Gold funds, I read the offer document for the benchmark AMC offering called the Gold BeES (pdf file) and here are some of the key points that understood by reading this document. Again, I am exploring here and not speaking from experience or expertise

  1. Their offering is an ETF meaning - it will be traded on the stock exchange (NSE) after the new fund offer (NFO) period (between February 15 and 23rd, 2007) like any other stock.
  2. The "face value" is Rs. 100/- for 1 gram of gold and today's market price (say Rs 860/gm) would mean that the units are sold at a "premium" over the FV of Rs 760/-
  3. You can buy and sell the units of the MF on the exchange and you can also choose to get physical delivery of the gold or decide to deposit gold to obtain units (no details on how the logistics will work here)
  4. Fees:Investment management fees is 1.25% p.a. of the weekly average net assets outstanding for amounts up to Rs.100 Crores and 1.00% p.a. of the weekly average net assets outstanding for amounts above Rs. 100 Crores. There is no entry/exit load post listing for the fund but you will end up paying brokerage since these transactions are treated as stock. During NFO, the entry load is 1.5% upto 50L of investment
  5. The custodian (person responsible for managing the physical gold) is The Bank of Nova Scotia
  6. The scheme will have 90%-100% of their portfolio in physical gold and 0%-10% in Money Market instruments, Securitised Debts, Bonds and cash
  7. NAV : NAV will be calculated like any other mutual fund and will include all the expenses of the AMC. But they have the concept of a "creation unit" which represents 1000 units plus some cash component which is equivalent to apparently 1KG of gold. This creation unit applies only when you exchange physical gold for the Bees units. This is a facility available only to authorized participants (how are they determined? I dont have a clue!). So when an authorized participant reedems one creation unit he receives 1 KG of gold. I did'nt quite understand their example of buying creation units by depositing gold on Pg 26 (why did the assumption of price of gold drop to 850 from 860?). If someone can figure it out, let me know.
  8. You can pledge these units similar to the loan against shares schemes.
  9. Tax : This fund will be treated as a mutual fund other than equity which means that it will not get the benefit of short term (10%) and long term (0%) tax rates.

Well thats all for now folks. Please add your comments if you found more information.

Friday, February 09, 2007

Gold funds in India - Unanswered questions

With the Indian government appoving gold based mutual fund schemes, there is obviously a rush by various mutual fund companies to start Gold funds and Gold ETFs in India. Knowing Indian and their love for gold, this could be a huge success story for the fund houses. There are still a few questions that I don't have an answer for today but it would be good to know.
  1. What is the tax implication for buying gold? Do we get tax rebates for buying a gold MF?
  2. Would a gold MF be treated as an equity MF or a debt MF with associated tax implications?
  3. When I sell my holding in the fund, do I have any extra exit loads because of liquidity risks?
  4. Will the price of the fund ever differ from the gold price? Considering this is more liquid than physical gold and traded mostly electronically, I would imagine that such advantages should allow the price of the fund to be at a premium to actual gold. Would this be the case?
So many unaswered questions in my mind. Any prudent reader would point out that we never asked such questions when we bought and sold gold so why now? The answer is that by bringing a structured investment tool, I would like to peg my risk level to that of buying and holding gold while leveraging the capabilities that a financial instrument can give me. Hence the questions.

You can always buy gold in T.Nagar... that institution would exist as long as Indians abound!

Thursday, February 08, 2007

A new year resolution - Write more blog

Having gone silent from September of 2006, I thought atleast this year I would try to write more. Its not the writer's block but sheer laziness that has kept me away. So let me try to get back to more serious blogging on an ongoing basis